Pugh Charts

There are many varieties of charts—bar, point and figure, candlesticks, swing, mercury, pretzel, and others. I prefer bar charts and swing charts. I began my career with point and figure charts, and insofar as they are now out of fashion, the new trader should give them a hard look-see. Swing charts can be generated using Pugh or Orthogonal swings (on the left) or conventional reversal (diagonal) swings. A unique type is the Goodman swing (furthest to the right on the diagram). It begins with the open, then either high or low (whichever occurs first), low or high (whichever occurs last), and the close.

I prefer Pugh swings. Goodmans are great for timing but if you keep them in hard copy they can take up a lot of space and time. See Figure below.

[caption id="attachment_13293" align="aligncenter" width="355"]Goodman Price-Time Swing Chart Goodman Price-Time Swing Chart[/caption]

There are only four possible types—bull (higher low/higher high), bear (lower high/lower low), outside (lower low/higher high), and inside (higher low/lower high)—as compared to the previous time unit. The entire complexity of any market can—ultimately—be reduced to combinations of these four types—I find that fascinating. In Figure below, the four types in black are referenced to the thick bar on the left.

[caption id="attachment_13294" align="aligncenter" width="550"]Pugh Bar Charts Pugh Bar Charts[/caption]

As a simple example: The famous head and shoulders top formation is typically a bull-bear-bull-bull-bear-bull-bear-bear with a possible inside swing sandwiched in between. Pugh types may be analyzed on swing charts, point and figure charts, or bar charts.

These four primary formations may also be seen on bar charts:

Tip: Using the Pugh syntax, you may certainly discover some new classical bar chart formations, as I have done.

For explorers, two roads less taken:The FOREX trader can also follow the four swing types on multiple charts—for example, 5-minute, 1-hour, and 1-day, and look for patterns in the interplay between them.
By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2016. Content published with author's permission.

Posted in ...